"A mole? That's quite unlikely, Attendant Xuhan. If the demonic expert in your theory is as powerful as we think, he wouldn't need to cooperate with a mole to justify the existence of the town to the sect.
"It would still be suspicious, not to mention attracting unnecessary attention over such a long period of time. The portal revealed itself quite recently, but the town has existed here for a much longer time.
"The only reasonable way to explain the existence of the illusory town is by following my guess. Maybe a powerful expert was in seclusion here, and Pine Town was the manifestation of his cultivation technique. Perhaps the sect even knew about it!
"Regardless, our movements seem to have disturbed whatever the illusory town was meant to achieve. It made them end their spell, retracting the illusory town and its people. Hence, all the townsfolk who had been turned into zombies in the fog disappeared alongside the town.
